French group AXA Private Equity has agreed to purchase a $740 million portfolio of fund commitments and direct investments from UK bank Barclays. It is the French private equity group's fourth such acquisition, following similar deals with Natixis, Bank of America and Citigroup, and cements its position as one of the major players in the secondaries market.
Capital for the Barclays deal will be provided from AXA’s latest secondaries fund, which is targeting between €3.5 billion and €4 billion, according to research group Private Equity Connect, a part of PEI. AXA declined to disclose further details.
Barclays said in a statement the deal value represented a premium to the price originally paid for the underlying assets. A source close to AXA said the portfolio was bought at a discount to its net asset value based on fair value calculations.
The transaction follows AXA’s acquisition of a $1.7 billion portfolio of private equity assets from Citigroup earlier this month. In June alone, the value of its secondaries deals totaled $2.4 billion.
Last year it bought a similar portfolio of assets from Bank of America for $1.9 billion in April, and a $900 million portfolio from French bank Natixis. The combined value of the four secondaries deals is $5.1 billion.
Barclays agreed to sell its portfolio “in anticipation of new regulations impacting the cost to banks of holding private equity investments and their future returns”, the bank said in a statement.
Basel III, a pending global agreement on bank's capital requirements, will increase the risk weighting of bank’s private equity assets. The recent recession has jolted a number of banks into strengthening their balance sheets by shedding non-core assets.
The portfolio did not include any investments managed by Barclays Private Equity, the bank’s in-house private equity division expected to spin-out from its parent in the coming months.
The recent spree of large secondaries transactions is part of “a broader market trend which comprises an increase in financial institution-related deals driven by regulatory factors”, said Vincent Gombault, a managing director of AXA’s fund of funds group.
He added a pricing recovery in the secondaries market has further fueled large secondary deals being pushed through. A number of these deals have “come from a 60 percent discount on NAV to just a single digit”, he said.
A booming secondaries market doesn’t come without its own legal and fund management issues. For an analysis on what regulatory and business risks GPs need to be aware of when LPs swap fund stakes, see our recent feature in sister-site Private Equity Manager.